Could Cryptos challenge the USD’s dominance?

The U. S. dollar’s dominant role in global markets is most likely to continue, but the rapid rise of cryptocurrencies may diminish the dollar’s status, according to a new paper by the Federal Reserve.

Private digital currencies, such as Bitcoin and Ether, as well as government backed coins, could reduce reliance on the dollar, Fed economists Carol Bertaut, Bastian von Beschwitz, and Stephanie Curcuru, wrote in their paper, entitled “The International Role of the U. S. Dollar.”

They paper writers cited changing consumer and investor preferences while new products could shift the balance of perceived costs and benefits.

The research paper comes as the Fed is expected to publish soon a separate, highly anticipated report on whether the US should issue central bank digital currency.

While Fed Chair Jerome Powell has expressed some openness towards CBDCs, other Fed officials, such as Vice Chair Randal Quarles, have been more skeptical.